'Everything on record': Parliamentary Finance panel chief defends unanimous Standing Committee report amid UPI MDR row
The Parliamentary Standing Committee on Finance's report on the Demands for Grants (2026-27) of the Department of Financial Services, Ministry of Finance, was laid before the Lok Sabha on August 12, 2026, and had been adopted unanimously by the Committee through its normal procedure.
The report recommended that the Department, while continuing efforts to expand digital payments in Tier 3 to Tier 6 towns, "explore" a self-reliant, tiered revenue model for the UPI ecosystem, alongside the existing incentive scheme and cashback components meant to widen adoption in underserved towns.
The Committee's institutional position is that its Demands for Grants report only recommended exploring a possible revenue model, not endorsing any specific transaction fee or Merchant Discount Rate (MDR) proposal, which the Committee says it did not separately examine.
Separately, the National Payments Corporation of India (NPCI) notified a new UPI Merchant Discount Rate framework on September 15, 2026: UPI merchant transactions above ₹2,000 will attract an MDR of 0.4%, effective from October 15, 2026, while UPI transactions up to ₹2,000 and RuPay debit card transactions remain free of any charge for both consumers and merchants.
This follows an August 2026 amendment (the Taxation and Other Laws (Amendment) Bill) that replaced the earlier flat statutory zero-MDR mandate under Section 10A of the Payment and Settlement Systems Act, 2007 with a discretionary power allowing the government to notify by gazette which digital payment modes may carry a charge, and at what rate.
Departmentally Related Standing Committees and the Demands for Grants Process
Departmentally Related Standing Committees (DRSCs) are permanent Parliamentary committees, one attached to each ministry/department, that scrutinise budgetary allocations, legislation, and policy within their jurisdiction. The Standing Committee on Finance is one of these DRSCs and examines the Demands for Grants (DFGs) of the Ministry of Finance and related departments before they are voted on by the Lok Sabha.
Key Details
- DRSCs were restructured in July 2004 to a standard composition of 31 members — 21 from the Lok Sabha and 10 from the Rajya Sabha — nominated by the Speaker and the Rajya Sabha Chairman respectively.
- The Committee examines each ministry's Demands for Grants in detail and presents a separate report to both Houses, since detailed floor discussion on every ministry's grants is not practically possible.
- Committee reports on Demands for Grants are recommendatory; the House still votes on the actual Demands for Grants, but the reports inform that debate.
- DRSC proceedings and draft reports are generally confidential internal committee documents until the final report is laid in Parliament, which is relevant to disputes over what a report did or did not recommend at an intermediate stage.
The dispute here is precisely over what the Committee's Demands for Grants report recommended (an exploratory study of a revenue model) versus what has since materialised (NPCI's specific MDR notification), illustrating how a Standing Committee's advisory recommendation differs from executive implementation by the regulator/nodal body.
Merchant Discount Rate (MDR) and UPI's Zero-MDR History
MDR is the fee a merchant pays to their bank or payment service provider for accepting a digital payment; it typically funds the payment ecosystem (acquiring bank, network, payment app). Since January 2020, UPI transactions and RuPay debit card transactions carried a statutory zero-MDR mandate under Section 10A of the Payment and Settlement Systems Act, 2007, meaning no charge could be levied on either merchants or consumers for these instruments.
Key Details
- The zero-MDR mandate was intended to accelerate digital payment adoption, particularly among small merchants, by removing the cost barrier to accepting UPI/RuPay.
- The zero-MDR policy meant payment service providers and banks bore the cost of UPI infrastructure, which the government partly offset through an incentive scheme reimbursing banks for low-value transactions.
- The August 2026 amendment converted the flat statutory bar into a discretionary gazette-notification power, and the subsequent September 2026 notification specifies that UPI transactions above ₹2,000 will attract a 0.4% MDR from October 15, 2026, while smaller UPI transactions and RuPay debit cards stay free.
The Committee's Demands for Grants report is the parliamentary trigger point being cited in the current debate over whether a tiered UPI revenue model was flagged early, since the actual MDR framework was notified by the regulator only after the statutory zero-MDR bar was amended by Parliament in August 2026.
Unified Payments Interface (UPI) — Institutional Design
UPI is a real-time payment system developed by the National Payments Corporation of India (NPCI) under the guidance of the Reserve Bank of India, allowing instant fund transfer between bank accounts through mobile applications using a Virtual Payment Address. It has become India's dominant digital retail payment rail since its 2016 launch.
The proposed tiered revenue model discussed by the Committee, and now partly implemented through the new MDR framework, addresses the long-standing tension between UPI's zero-MDR growth strategy and the fiscal/ecosystem sustainability of that model.
- Parliamentary Standing Committee on Finance's report on Demands for Grants (2026-27) of the Department of Financial Services was laid in the Lok Sabha on August 12, 2026, and adopted unanimously.
- DRSC composition: 31 members (21 Lok Sabha + 10 Rajya Sabha) since the July 2004 restructuring.
- New UPI MDR: 0.4% on merchant transactions above ₹2,000, effective October 15, 2026, notified by NPCI on September 15, 2026.
- UPI transactions up to ₹2,000 and all RuPay debit card transactions remain free of charge for consumers and merchants.
- Zero-MDR mandate for UPI/RuPay debit cards was in force since January 2020 under Section 10A, Payment and Settlement Systems Act, 2007, amended in August 2026 to allow discretionary, gazette-notified MDR.